- The government’s debt to Vivo Energy Kenya under the fuel stabilisation scheme jumped five times to Sh21 billion ($167 million).
- The Sh21 billion debt potentially makes Vivo Energy Kenya one of the hardest-hit oil marketers due to compensation delays.
The government’s debt to Vivo Energy Kenya under the fuel stabilisation scheme jumped five times to Sh21 billion ($167 million) in the year ended December, prompting the parent firm of the oil marketer to flag the delayed payments. Disclosures by the parent firm, Vivo Energy Limited, show that government receivables increased from Sh4.023 billion ($31 million) a year earlier amid Treasury’s struggles to compensate oil marketers for keeping pump prices low.
Kenya started stabilising pump prices in April 2021, with oil marketers keeping prices of Super, diesel and kerosene unchanged despite a spike in global prices to cushion consumers from the adverse effects of high fuel prices, notably the high cost of living. But the Treasury delayed compensating the oil marketers, throwing them into a cash flow crunch that forced them to borrow more from banks to pay for cargo and run operations.
The Sh21 billion debt potentially makes Vivo Energy Kenya one of the hardest-hit oil marketers due to compensation delays. Oil marketers estimate the outstanding debt under the pump prices stabilisation scheme at Sh50 billion, highlighting the adverse effect of the programme that has since been discontinued. The government’s delay in compensating foreign and locally owned oil marketers for keeping pump prices low was linked to an acute shortage of fuel that hit Kenya from March to April last year.
The oil marketer’s revenues from the Kenyan market account for 15 per cent of the $10.9 billion recorded across its African operations last year. Vivo had 286 retail stations in Kenya at the end of the review period and sold 1.49 billion litres there.